Your employment contract says one figure, but your bank account shows another. The difference is mostly Pay As You Earn (PAYE), plus your NSSF contribution and, for part of the year, Local Service Tax. Understanding these deductions helps you check your payslip, negotiate salary and plan your budget.
What is PAYE?
PAYE is income tax on employment income. Your employer calculates it every month, deducts it from your pay and remits it to the Uganda Revenue Authority (URA). It applies to salaries, wages, bonuses, allowances and most benefits in kind.
PAYE rates for resident individuals (monthly)
These are the long standing monthly bands for resident employees. Always confirm with URA if a new Finance Act changes them.
- Shs0 to Shs235,000: no tax
- Shs235,001 to Shs335,000: 10 percent of the amount above Shs235,000
- Shs335,001 to Shs410,000: Shs10,000 plus 20 percent of the amount above Shs335,000
- Shs410,001 to Shs10,000,000: Shs25,000 plus 30 percent of the amount above Shs410,000
- Above Shs10,000,000: Shs25,000 plus 30 percent of the amount above Shs410,000, plus an extra 10 percent of the amount above Shs10,000,000
Non residents do not get the tax free band and pay higher starting rates, so the calculation is different for them.
Other deductions on your payslip
NSSF
For employees covered by the National Social Security Fund, you contribute 5 percent of gross pay and your employer adds 10 percent, making 15 percent saved for you. Your 5 percent is deducted from your salary; the employer's 10 percent is an extra cost to the employer. Note that in Uganda your NSSF contribution does not reduce the salary used to calculate PAYE.
Local Service Tax (LST)
LST is a local government tax on people earning above a threshold. It is an annual amount based on your monthly income, usually paid in four equal monthly instalments during the first four months of the financial year (July to October). Typical annual amounts range from Shs5,000 for low earners up to Shs100,000 for people earning above Shs1,000,000 a month.
Worked examples
Example 1: Gross salary Shs300,000
- Taxable amount above Shs235,000 = Shs65,000
- PAYE = 10 percent of Shs65,000 = Shs6,500
- NSSF (5 percent) = Shs15,000
- Net pay before LST = Shs300,000 minus Shs6,500 minus Shs15,000 = Shs278,500
Example 2: Gross salary Shs500,000
- Amount above Shs410,000 = Shs90,000
- PAYE = Shs25,000 plus 30 percent of Shs90,000 (Shs27,000) = Shs52,000
- NSSF (5 percent) = Shs25,000
- Net pay before LST = Shs423,000
Example 3: Gross salary Shs1,500,000
- Amount above Shs410,000 = Shs1,090,000
- PAYE = Shs25,000 plus 30 percent of Shs1,090,000 (Shs327,000) = Shs352,000
- NSSF (5 percent) = Shs75,000
- Net pay before LST = Shs1,073,000
- In July to October, LST of Shs100,000 a year may also be deducted at Shs25,000 per month.
Simple formula you can use
If your gross monthly pay is above Shs410,000 and below Shs10 million:
PAYE = 25,000 + 0.30 x (Gross minus 410,000)
Net pay = Gross minus PAYE minus (0.05 x Gross) minus any LST instalment
What counts as taxable employment income?
- Basic salary and wages
- Housing, transport, lunch and other cash allowances
- Bonuses, overtime and commissions
- Benefits in kind such as a company car for private use or free housing, valued under URA rules
Some items such as genuine reimbursement of business expenses are not taxable when properly documented.
How to check your PAYE is being paid
- Get your TIN. In 2026, your National Identification Number (NIN) is used as your tax identification for individuals.
- Log in to the URA web portal and check your ledger or returns filed against your TIN.
- Compare with your payslips. If your employer deducts PAYE but does not remit it, raise it with HR and, if needed, with URA.
- Check your NSSF statement as well, using the NSSF app, USSD or online portal.
Tips for employees
- Negotiate in net terms. When discussing salary, ask what the take home will be after PAYE and NSSF.
- Check allowances. Allowances are generally taxable, so a big allowance package does not avoid tax.
- Keep payslips. They are useful for loans, visas and disputes.
- If you have two jobs, your second employer may tax you without the tax free band. File a return to reconcile.
Tips for employers
- File PAYE returns and pay by the 15th of the following month to avoid penalties and interest.
- Register all employees with NSSF and remit contributions on time.
- Use payroll software or a reliable spreadsheet and review it every time tax law changes.
Frequently asked questions
Is there PAYE on a salary below Shs235,000?
No, for resident employees monthly income up to Shs235,000 is not taxed.
Are casual workers subject to PAYE?
Yes, employment income of casual workers is also taxable under the same principles if it exceeds the threshold.
Can I claim back PAYE?
Generally no, unless too much was deducted in error. In that case the employer can correct it or you may claim through URA processes.
Get help with payroll and tax
Need help setting up payroll, checking your payslip or understanding a contract? Book a short call with a verified accountant or tax consultant on The Quick Consult. This guide is general information. Confirm current rates with URA.